5 Negotiating Tactics for Commercial Loan Financing

Negotiating the rates and terms of commercial loan financing is just as, if not more, important as negotiating the property’s purchase price. There are several ways to save when financing your commercial loan. One of the best ways is to find a trustworthy, reliable lender who knows you, your needs, and your goals. Having a solid relationship with your lender opens the door to multiple discounts and facilitates commercial loan financing negotiation.

1. Get the Lowest Interest Rate Possible
Since interest rates have such a large impact on your monthly payment (and therefore, your monthly cash flow), it’s important to negotiate the lowest rate possible. If you can negotiate an interest rate around 5%, consider yourself lucky, especially if your loan term is 10 or more years.

2. Closing Costs
Closing costs are one of the more common commercial loan financing negotiations, because they can be a substantial figure. Usually, the buyer is responsible for closing costs; however, it is possible to negotiate and have the seller cover some or all of the costs. For example, if the buyer wants to forego up-front expenses, he or she can pay the seller’s full asking price if they agree to cover the closing costs.

3. Save Time By Negotiating  a Quick Transaction
If you have plenty of cash on-hand but little time to spare, you can often negotiate the speed in which commercial loan financing takes place. This may require extra cash, but it means much less paperwork and a much faster approval process.

4. Get Rid of Pesky Fees and Expenses
A majority of consumers look to save money wherever they can. Similarly, businesses look to earn money wherever they can. To earn money, they look for business; to get business, they’ll often cut consumers a break on miscellaneous fees or expenses. For example, borrowers can often negotiate appraisal and title fees. And of course, buyers can look to save on inspection costs, too (e.g. if the buyer is weary of a leaky roof, the seller may agree to pay for the inspection).

Ask About Prepayment Penalties
If you are looking to own the property for a long period of time, ask your commercial loan financing officer if a prepayment penalty can help you lower your interest rate. Some borrowers negotiate three- to five-year prepayment penalties that lower their rate up to .70%. Be sure, though, that you plan to keep the property the entire prepayment term, as selling or refinancing before the penalty expires could cost you months and months of interest.